At the meeting, the Commission also focused on the SEC-specific proposal under Dodd-Frank concerning the removal of credit ratings references from regulation under the Securities Exchange Act of 1934, another in a series of proposals on the topic.

Related Documents

Removal of Certain References to Credit Ratings Under the Securities Exchange Act of 1934

Speakers

Commissioner Luis A. Aguilar, whose statements include:

An explanation of the goals set out by the swaps definition proposal.

A request for comment on the following question: "Does the proposed treatment of index CDS whereby a payment is contemplated based on the default of a particular entity in the index rather than solely on the value of the index adequately address the federal regulatory interests under the federal securities laws and the Commodity Exchange Act?"

Concerns as to what the SEC should do when there exists no appropriate substitute for credit ratings references.

Concerns involving the additional costs and burdens imposed on the industry and the Commission by the credit ratings proposal.

The following questions:

"What substitute for the use of NRSRO ratings in the net capital rule would provide an objective standard?; and

How does the Commission make a finding that removing the existing credit rating references is in the public interest if there is no appropriate substitute?"

Chairman Mary L. Schapiro; whose statements include:

"The definitions we propose today balance several policy and legal issues in a way I believe is practical, takes into account the specific nature of derivatives contracts, and is consistent with existing securities regulations. The proposal before us seeks to provide guidance, in rules and interpretations, by using clear and objective criteria that should clarify whether a particular instrument is a swap regulated by the CFTC, a security-based swap regulated by the SEC, or a mixed swap regulated by both agencies."

"The most significant proposed change in [the credit ratings] area would preclude firms from looking solely to ratings when calculating capital charges for commercial paper, nonconvertible debt, and preferred stock under the Commission’s net capital rule. Instead, each firm with proprietary positions in these instruments would need to look at a variety of factors, and they would need to have and document procedures for doing so."

Commissioner Kathleen L. Casey, whose statements include:

Request for comment on whether the Commission has indeed selected appropriate and working substitutes for references to credit ratings.

Request for comment concerning the clarity of the proposed definitions set out by the Commission.

Commissioner Elisse B. Walter, whose statements include:

Support for the credit ratings proposal.

A note that the removal of references to credit ratings should not be interpreted as the NRSRO system being unhelpful or of poor use to investors.

Commissioner Troy A. Paredes, whose statements include:

Support for the credit ratings proposal, but concerns regarding the "practical impacts" of the recommendation, specifically the potential consequences of the net capital rule provision.